LRAD plans to spin off division

Small company makes sound devices for Navy

LRAD Corp., which makes long-range hailing devices for the military, said Thursday that it plans to spin off a portion of its business into a new publicly traded company.

The San Diego company will seek shareholder approval to place its HyperSonic Sound division, or HSS, into a separate entity named Parametric Sound Corp.

LRAD founder and board member Elwood Norris, a prolific San Diego inventor, would become chief executive of the spinoff and resign from LRAD’s board.

Whether Parametric Sound would have much value as a public company is unclear.

LRAD itself is small. Its market capitalization is $49.5 million. It had sales of $15.8 million for its fiscal year that ended in September, but only about $586,000 of that came from its HyperSonic Sound product line.

“It sounds reasonable that they’re going to do this if they can’t find a buyer, but the company is so small right now, it’s kind of hard to separate it into distinct business units,” said Bud Leedom of California Equity Research, which tracks stocks in the state.

Long Range Acoustic Devices, or LRADs, deliver a loud burst of sound over distances as far as three kilometers. Mostly used on Navy ships, they warn off intruders.

HSS speakers use a different technology, tapping into ultrasonic frequencies that humans can’t hear to deliver a very targeted beam of sound. One person could hear it, while another standing a few feet away couldn’t.

The company has marketed its HSS sound systems to the digital sign industry. But the costs of the speakers and slow adoption of digital signs as advertising vehicles have led to limited sales.

The company tried to sell the division but couldn’t get the right price, said Robert Putnam, an LRAD spokesman. It views the spinoff as a way to potentially realize value for shareholders.

“We recognize that many of our stockholders originally invested in the company because of HSS,” Tom Brown, LRAD’s chief executive, said in a statement. “As we have been unsuccessful in developing a market for HSS, we have no current plans to invest further resources in it.”

Norris agreed to advance funds to pay for the spinoff. LRAD would not contribute cash or working capital to the venture other than inventory. Efforts to reach Norris on Thursday were unsuccessful.

The proposal calls for existing shareholders to receive one share of Parametric Sound for every two shares of LRAD they own. The ticker symbol, stock exchange and other details of the transaction have not been determined.

Putnam said the process is expected to take three or four months.

LRAD changed its name recently. It was formerly known as American Technology Corp. Its shares rose 2 cents Thursday to close at $1.62.